In order to boost its liquidity position, Essex Property Trust, Inc. (ESS - Analyst Report) disclosed the pricing of 3.875% senior unsecured notes worth $400 million. In particular, the company’s operating arm, Essex Portfolio, L.P., has priced a private placement of these notes at 99.234% of par value. The offering will close on Apr 15, 2014, upon fulfillment of customary closing conditions.
The notes, having a yield to maturity of 3.968%, will mature on May 1, 2024. The interest on the notes is payable semi annually on May 1 and Nov 1, with the first payment starting on Nov 1, 2014. This residential real estate investment trust (REIT) expects to use the reaped proceeds from the offering for refinancing existing senior unsecured facilities and other corporate needs.
For Essex Property, whose cash position stood at $53.8 million as of Dec 31, 2013, the transaction is a strategic fit as it will strengthen its balance sheet. This will, in turn, pave way for making accretive investments going forward.
Notably, earlier this month, Essex Property successfully accomplished the $16.2 billion merger with BRE Properties. This led to the creation of a premium West Coast pure play multifamily REIT with an equity market capitalization of about $11.1 billion. With a solid property base, significant geographic overlap and strong management team at Essex, this combined entity is believed to efficiently leverage on the attractive market fundamentals, synergies and reward shareholders accordingly.
Essex Property is scheduled to release its first-quarter 2014 results on May 7, after the market closes. The Zacks Consensus Estimate for funds from operations (FFO) for the quarter is pegged at $2.00, representing year-over-year growth of 7%.
Essex Property currently has a Zacks Rank #3 (Hold).
Investors interested in the residential REIT industry may also consider Associated Estates Realty Corporation , Preferred Apartment Communities, Inc. (APTS - Snapshot Report) and UDR Inc. (UDR - Analyst Report) . All these stocks carry a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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